PIET LE ROUX AND RUSSELL LAMBERTI: Successful challenge to flawed NHI is likely and necessary

In signing the National Health Insurance (NHI) Act on May 15, President Cyril Ramaphosa essentially presented a proposal to nationalise healthcare. 

In so doing, he attempted an outrageous framing for negotiations over the future of healthcare. We would be foolish to fall for this brazen anchoring technique, especially in SA politics, where a failing state keeps escalating rhetoric to make up for its loss of authority and executive capability.

Demands for a nationalised healthcare system should not be met with timid compromise but by redefining the terrain for negotiations in the interests of a flourishing healthcare environment. 

The NHI is not really a “health insurance” system but rather a state-pays-state-controls system. Intent on eliminating healthcare independence, choice and competition, the NHI threatens to create another Eskom-like monopoly where “health-shedding” becomes a permanent feature. 

The act’s gaping vagueness means much of the NHI will be made up on the go. What is clear, though, is that it intends such extreme state control that private medical aid schemes and medical insurance policies would largely disappear. Under the NHI, healthcare professionals would be functionaries and patients would be applicants in a state system, stripped of their autonomy. 

These conditions will push healthcare professionals away from the NHI system and deter young people from pursuing careers in medicine, reducing the availability of functional healthcare facilities and with impossibly long waiting lists for substandard care. Further emigration of productive families and added difficulty in attracting talented people from abroad would compound the damage.

These harms are not just future tense. They have already begun. 

At a conservatively estimated R1-trillion or so, the expected annual price tag of the NHI is economically and fiscally paralysing. 

Conservative, because costs are likely to spiral upward from an avalanche of frivolous demand for “free” healthcare, rampant fraudulent claims, and the state’s endemic procurement corruption. 

The act makes it clear that NHI procurement would be subject to the same BEE and state procurement rules that have infected countless state entities with debilitating cost premiums. We should also expect the state to make a concerted attempt to subject the entire industry to “third wave” BEE provisions — that is, banning companies from participating in the healthcare industry at all unless they restructure according to specified BEE levels. 

Given the state’s current annual budget of about R2-trillion, funding the NHI would require extracting another 50% or so in annual revenue from already-exhausted taxpayers. This is the sort of fiscal and economic shock that cripples economies and bankrupts states, propelling them towards default or the dangerous allure of money printing and inflationary chaos. Hyperinflationary collapses always, after all, germinate from absurd fiscal promises while crushing private sector productivity. 

The NHI is therefore not just “very expensive” or “fiscally demanding”. It is economically unthinkable, unless one wants to tempt a Zimbabwean fate. 

Redefining the negotiation terrain is imperative and possible for several reasons. 

The NHI is a hopelessly unrealistic proposal. The National Treasury admits it is unviable. It is deeply unpopular among and faces a groundswell of opposition from medical companies, doctors, millions of private medical scheme members and policy holders, and private healthcare patients. Maximum achievable non-cooperation with the NHI system by medical practitioners alone would render it largely defunct and unworkable from the outset. 

Further, the NHI Act is legally challengeable on numerous grounds and several parties — including Sakeliga — are mounting concerted and complementary litigation from different angles.

Beside NHI litigation, the attempt to tie medical and pharmaceutical licensing to BEE is also eminently challengeable. This licensing tie-in is part of a wider, harmful third wave of BEE, in which the state is trying to subject all economic activity to state permission based on racial criteria.

Well-crafted, resolute public-interest litigation should be used to the fullest extent available to shift the negotiation terrain back towards realistic and constructive possibilities. 

Furthermore, there is time. The NHI Act is not yet in effect. The implementation timeline is likely to be slow, inefficient, and beset by bureaucratic and political friction, leaving probably several years to mount and escalate comprehensive opposition. 

Amid the good prospects for resisting the NHI, one danger looms above others. This danger is the risk of premature concessions and harmful settlements while the state’s hand is much weaker than it pretends. 

For example, one prominent idea proposed in NHI stakeholder discussions is to force all formal sector employees to be members of private medical schemes. This model derives its apparent merit from the purported increase in private healthcare coverage among the formally employed, thereby relieving the strain on public healthcare services. 

But uncovered formal sector employees choose not to be private medical aid members because they value food and other much-needed goods they now buy more than precautionary healthcare contributions that are also priced out of their reach by minimum prescribed benefit regulations.

And it is no use to argue that employers should bear the cost. By raising the cost of employment, the measure would further reduce hiring amid an unemployment crisis. 

Furthermore, if employees or employers could be coerced into spending more on healthcare, it would only lead to less spending and contractions elsewhere in the economy. It would also undermine existing alternative healthcare and insurance arrangements such as stokvels and other co-operative schemes.

This enforced insurance proposal is just one example of the difficulty of restructuring healthcare provision with centralised directives to appease unrealistic political preferences. And it shows the problem with trying to extend healthcare by regulatory fiat. 

Shifting the negotiation terrain must go beyond merely blocking the NHI and defending the status quo to crafting a favourable environment that unleashes the full potential of healthcare services to meet healthcare needs.

There is far too much regulation in the healthcare sector even without the NHI, not too little. 

Medical insurance markets face absurd constraints on the cover they can offer. Prescribed minimum benefits and other restrictions prohibit medical schemes from serving varied needs, circumstances, and risk profiles. Pharmaceutical regulations and price controls restrict the supply of treatments. Stringent licensing requirements are barriers to establishing and expanding hospitals, clinics, and medical facilities. Restrictive, state-monopolised medical training policies choke off the supply of capable doctors, nurses, and technicians.

Only a thriving economy absorbing millions more people into productive employment together with greater freedom for healthcare businesses to trade, invest and innovate can furnish the means required to scale up quality healthcare supply. 

The NHI turns this logic on its head, adding tax and regulatory burdens that will ultimately crush productivity and destroy one of the country’s most important industries. 

Fortunately, the NHI is not inevitable. It must be staunchly challenged, and the prospects for success from these challenges — if sustained, resolute, and well-supported — are promising.

Independent businesses and business organisations should remain patient and undaunted, avoid unnecessary compromises and overcompliance with the NHI, and support well-structured opposition to buy time and repeal the NHI Act or render it functionally impotent. 

In doing so, they will play an important role in crafting a flourishing environment for healthcare.

• Le Roux is CEO and Lamberti chief economist at Sakeliga.